Anthropic Presses D.C. Circuit to Reconsider Pentagon 'Supply Chain Risk' Designation

Anthropic is asking a federal appeals court in Washington, D.C. to rehear a case over the Pentagon's decision to brand the artificial intelligence company a national security supply chain risk, a move the firm says has already cost it billions of dollars in lost business.

In a petition filed Tuesday with the U.S. Court of Appeals for the D.C. Circuit, Anthropic argued that the panel's majority misinterpreted a federal statute, transforming a law "aimed at hostile foreign actors into one that presumptively reaches every government contractor." The company contends the designation was retaliation for its public stance on AI safety, not a legitimate security assessment.

The dispute traces back to March, when the Defense Department, led by Secretary Pete Hegseth, applied the supply chain risk label to Anthropic. The action barred defense contractors from using the company's technology in their work with the agency. It followed a breakdown in negotiations over how the military could deploy Anthropic's Claude AI models. Anthropic had signed a $200 million contract with the Pentagon in July 2025, but talks collapsed that September as the company began negotiating Claude's deployment on the DOD's GenAI.mil platform.

The D.C. Circuit upheld the Pentagon's blacklisting in a 2-1 decision in September, rejecting Anthropic's argument that the ban was arbitrary, unauthorized and unconstitutional. The court's majority found the Pentagon acted reasonably after Anthropic refused to allow its AI to be used in autonomous weapons or mass surveillance.

In its rehearing petition, Anthropic's attorneys wrote that the court let the Pentagon act "without any pre-designation process and despite straightforward evidence the designation was retaliation for Anthropic's speech about AI safety." The filing opens with a pointed characterization: "The Secretary of War branded Anthropic — an American AI company whose models help defend the nation — a national-security 'supply chain risk' because it declined to permit its models to be used for mass surveillance of Americans or lethal autonomous warfare and publicly explained those AI-safety commitments."

Anthropic has said the blacklisting has cost it billions of dollars in lost business. A representative declined to comment beyond the filing, and the Pentagon did not immediately respond to a request for comment.

The company has seen mixed results in parallel legal challenges. In August, a federal judge in California struck down a separate designation under a different law, providing Anthropic with a partial victory in its broader fight against government restrictions.

The legal battle unfolds against a backdrop of policy tension over AI regulation. Anthropic CEO Dario Amodei has called for regulation covering all U.S. frontier AI companies, while the Trump administration has favored a pro-growth approach with less oversight.

The outcome of the rehearing request could have significant implications for how the government treats AI contractors that impose safety guardrails on their technology. A ruling that the Pentagon must provide pre-designation process and evidence beyond speech-related retaliation would reshape the legal framework for national security supply chain determinations across the defense contracting industry.